Using the high-low method, Regency Hotels estimates the total costs of providing room service meals at $6,000 per month, plus 40 percent of room service revenue.
a. What is the contribution margin ratio of providing room service meals?
b. What is the break-even point for room service operations in terms of total room service revenue?
c. What would you expect to be the total cost of providing room service in a month in which room service revenue amounts to $20,000?